Nugan Hand

JONATHAN MARSHALL

The friends of

MiehoelHond

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ICHAEL HAND WAS tough. He could take the heat. Highly decorated for bravery in Vietnam, he boasted, "I'm frightened of nothing. I've killed men from behind a machine gun while under fire and outnumbered." But even Hand had to admit that Vietnam "was nothing compared to the mess I've been left with to clean up this bank." Frank Nugan, his partner at the Nugan Hand bank in Australia, had been found with his bullet-riddled brains splattered all over the inside of his car. Nugan had departed , from this world leaving the bank with millions in debts and unrecorded transactions. As Australian commonwealth police, Royal Commission investigators, and agents of the CIA, FBI, and U.S. Customs began sniffing around, ugly rumors began to surface about the bank's ties to prominent politicians, to drug runners and mobsters in Australia and the United States, and even to the CIA. It was time to run. Hand ran. Built like a linebacker, Michael Hand was a wholesome, all-American boy. He studied forestry at Syracuse University, then worked briefly as a teacher in Los Angeles. In 1965 he went off to fight in Vietnam. He served in the army Special Forces, whose exploits included secret missions for the CIA into North Vietnam, Laos, and Cambodia. It was then, perhaps, that he made the first of a long string ofless than savory friendships. In a rough war, Hand's buddies were the roughest of the lot. Hand won the Distinguished Service Cross for rescuing his commanding officer during a savage firefight in the highlands of central Vietnam. Hand left Vietnam in 1968 to settle in JONATHAN MARSHALL is an associate editor of INQUIRY.

INQUIRY

Sydney, where he and other American soldiers had so often gone for "rest and recreation." Young and ambitious, he soon teamed up with an equally hungry Australian, Frank Nugan. The son of a Spanish migrant who made good in the food-packing business, Nugan took a law degree at the University of California at Berkeley. His easy, ingratiating manner could "charm the pants off anybody," one of his American business associates recalls. Equally important, he relished the "open combat" of the business world and wouldn't shirk a good fight. The two men were made for each other. In 1970 Nugan and Hand went into partnership as investment advisers. Most of their clients were current or former American servicemen whom Hand had met in Vietnam or in Sydney bars. Together the pair made a bundle in land and mining speculation during the boom of the early 1970s. Before the boom turned to bust, they took their profits; in 1973, with an eye to international markets, where business was still good, they organized the N ugan Hand merchant bank. From a small beginning, the turnover reportedly skyrock-

eted to more than one billion dollars (U.S.) in 1977-a most impressive record, even if that didn't put the bank in the ranks of the true giants. By that time, Nugan Hand could boast of a truly international presence, with a base in the Cayman Islands and branches or offices in Hawaii, Washington, D.C., Chile, Argentina, Germany, and throughout the Far East. Toward the end of 1979 it began negotiations to purchase another bank in Miami. But always there was an aura of mystery to this "very private" bank, as Michael Hand called it. The bank didn't deal with just anybody, explained Frank Nugan, but only with "a very narrow segment of the market, the elitists who have a requirement to get involved on a personal basis, who like to relate to a face more thanjust the business." This cloak of privacy began to come apart, however, in May 1978, when the attorney general of New South Wales issued warrants for the arrest of Frank Nugan and his brother Ken. They were accused of conspiring to defraud shareholders of Ken's vegetable packing firm by illegally manipulating the company's annual meeting in 1977. A Sydney

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magistrate assigned a hearing date for the case in May of this year. But the prosecutors never got to hear Frank Nugan's story. On January 27, 1980, he was found on a lonely backcountry road, slumped over in his Mercedes-Benz sedan, shot through the head by a .30-caliber, high-powered army rifle. In Nugan's wallet police found the business card of William Colby, former director of the CIA.

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AS IT A SUICIDE? THE :oroner thought so, but not an Insurance company attorney, who provoked a most unusual dispute at the official inquest by suggesting that a suicide "would have to be a contortionist to receive the head wound while in that position." The dead man's fingerprints were not found on the rifle. Then there was the strange fact that a Sydney company with which he had once done business had continued a life insurance policy on the young and healthy banker. The company stood to gain $1 million from his untimely death. Frank Nugan may have been young and healthy, but it soon became apparent that he was no Boy Scout. His partner Michael Hand revealed at the inquest that Nugan had fraudulently misappropriated "a vast sum of money" from the bank without Hand's knowledge. On top of that, he had loaned out $3 million to persons and groups unknown. Finally, Hand discovered that his unscrupulous partner had tried to blackmail the attorney general of New South Wales into calling off his investigation of the Nugan brothers. Michael Hand's own situation, however, was even more desperate than he first let on. Court-appointed liquidators for the bank hinted that as much as $40 million was unaccounted for. State investigators uncovered a massive tax avoidance scheme that Frank Nugan had engineered on behalf of wealthy clients-principally Australians and overseas Chinese, who used the bank's international branches to hide their assets. And perhaps most ominous, the same investigators began looking into the theory that the CIA had used the bank to launder millions of dollars in Australia for political subversion. Through it all, one odd fact stood out: Remarkably few of the bank's creditors chose to step forward to recover their funds. The apparent reason was that Nugan Hand had specialized in processing "black" money. Michael Hand decided not to stick around to pick up the pieces. After all, he

could blame only so much on his late partner. He fled the country to parts unknown, perhaps South Africa or the United States. (He still held a United States passport, although he had Australian citizenship.) Australian police alerted Interpol, but to this day his whereabouts remain a mystery. "I doubt if we'll ever see Michael Hand

incorporated an investment company, Australasian and Pacific Holdings, Ltd., whose stated aim was to develop an international resort and "adventure club" on the Great Barrier Reef. Its stockholders shared an unusual background. Four of them worked for Air America, the notorious CIA proprietary airline that ran men and supplies into Laos and

-Bill Colby and Congressman Bob Wilson,' read the slip of paper in the dead man's car. again," says one of his close colleagues. "He's either dead or has gone into hiding abroad, never to return." Since Michael Hand absconded last June, the mystery surrounding the bank has only deepened. Bits and pieces of evidence have surfaced to indicate that Nugan Hand prospered on the edge ofa netherworld of drugs, organized crime, and international intelligence. If the whole story is still far from clear, the outlines are beginning to take shape. The specter of CIAinvolvement arose the moment police discovered William Colby's card in Frank Nugan's wallet. Colby, now a lawyer in Washington, D.C., vigorously denies any connection between the agency and the bank. "I did some legal work for Nugan-and that's all." Colby declines to elaborate, citing the attorney-client privilege. But investigators found another intriguing slip of paper in Nugan's car that read: "Bill Colby and Congressman Bob Wilson." Wilson, a Republican from San Diego, had met Michael Hand during a trip Wilson and four other congressmen took to Australia early in 1980 in order to inspect the top-secret U.S. intelligence base at Pine Gap.

more than once ran opium out. Under CIA auspices, Air America became the largest cargo carrier in the world. Several other stockholders worked for Continental Air Services, a similar airline that contracted with the CIAfor service in Vietnam and Laos. Nugan Hand itself recruited heavily from the ranks of spooks, especially in its later years. Its Manila consultant, General Roy Manor, helped produce the CIA's post-mortem on the failed Iranian hostage rescue attempt. Its Taiwan representative, Dale Holmgren, had been Taiwan flight services manager for Civil Air Transport, the parent of Air America and indeed of all the CIA airlines. Then there was Walter McDonald, a Nugan Hand consultant and operator of its Annapolis office. McDonald, a professional economist, for a long time directed the CIA'Senergy analysis section. He joined the bank in July 1979 to do loan feasibility studies, he says, and to straighten out the bank's books. It was McDonald who introduced Frank Nugan to William Colby. And McDonald, in turn, met Nugan through Guy Pauker, listed in bank records as one of its American representatives. Pauker, an Asia consultant to the CIA and other ICHAEL HAND'S OWN government agencies, played a key role in developing the scenario for the 1965 past is curious. He claimed to have entered the Special Indonesia coup. So many of the bank's staff had served Forces in 1966 as a private, but the Green Berets accept' no privates. That in Vietnam that Australian bankers referred to them as "the Green Berets." plus some mysterious gaps in Hand's official military record raise the possibil- Some had served in more exalted posts. ity that Hand really worked for the CIA. Two Vietnam-era associates of Colby, Admiral Earl Yates and General Edwin One Washington source claims that Black, came aboard the bank in 1977. Hand served in Colby's Vietnam-era Phoenix program, a CIA campaign to Admiral Yates, as chief of staff for plans and policy for the U.S. Pacific Comassassinate civilians who sympathized mand, was responsible for the general with the Viet Congo war plan for the Pacific and Indian In 1969, having left Vietnam, Hand

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oceans and supervised the military assistance program for the Far East during the Vietnam War. He met Frank Nugan in Australia in the mid-1970s, and was carried away by Nugan's charm and apparent rectitude. "I thought Frank Nugan was very, very honest and straightforward and a Christiangentleman," he recalls. (Nugan was indeed religious. Beside his corpse police found his Bible, with a note: "Visualize lOO,OOOcustomers worldwide. Prayerize, actualize.") Yates refuses to say what he did for his salary: "I was just an employee." But sources agree that he supervised the bank's offices in Washington, D.C., and the Cayman Islands. And he seems to have gone to a lot of trouble to introduce Nugan to powerful and influential people. In September 1979 he arranged for Nugan to attend a $1 OOO-a-platefundraising dinner with President Carter. Two years earlier, he had put Nugan together with General Black. Black, Nugan Hand's representative in Hawaii, began his career during World War II in the oss, the immediate forerunner of the CIA.In the early Eisenhower years he served on the Operations Coordinating Board, which supervised the implementation of National Security Council policies and oversaw the operations of the CIA. He rose to command U.S. forces in Thailand and Vietnam

of it." Ex-CIAanalyst Walt McDonald is also uncertain: "I really don't see it happening, but I can't vouch for it." Nugan Hand could have been simply an investment front for a group of CIAconnected Vietnam vets who decided to trade in their international connections for a pile of money. But one American, energy consultant Peter Wilcox, claims there was more to it than that. He says he met Michael Hand in Singapore after General Black recommended him to Hand. Hand and Nugan tried to recruit him to work for the bank; Nugan told Wilcox that he wanted him to work under "deep cover" as part of an unidentified intelligence operation. Wilcox, who appears to have had prior associations with U.S. intelligence activities, declined the offer. Later his military friends told him that the bank was moving "unbelievable amounts" of money covertly out of Australia, Indonesia, and Thailand. And an anonymous former executive of the bank claims that the CIA, under William Colby, laundered millions of dollars through Nugan Hand into Europe to subsidize pro-American political parties. Allegedly the Italian Christian Democrats received some of the money. There has been no confirmation, and Colby denies the story. Although the CIAconnection remains murky, it has become abundantly clear

A.dmira' Yates won~t discuss what he did for the bonk. 'I was just on emp'ogee~~ he sags. during the 1960s, then went to work for LTV Aerospace Corporation in Thailand. For Nugan Hand, Black did little or no actual banking. Instead, he specialized in trade services "to help U.S. and Australian firms find joint venture partners in Southeast Asia." Most of his work centered around Thailand and the Philippines.

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O THE QUESTION ARISES: Was Nugan Hand a CIA front, a conduit for laundering money used in Far Eastern operations? Admiral Yates indignantly brands the idea "absolutely absurd, ridiculous, and stupid." But General Black isn't quite so sure. "I'm not saying it's not possible," he allows, "but I certainly wasn't aware INQUIRY

that Nugan Hand, using the same mix of discretion and financial sophistication that appeals to intelligence;" agencies, worked its way to the heart of Australia's criminal milieu. Its affairs repeatedly crossed those of known underworld figures: • Bernie Houghton represented Nugan Hand in Saudi Arabia and Singapore. From Singapore he involved the bank with arms trafficking in Southeast Asia and Latin America. After Frank Nugan's death he transferred $150,000 to the United States from the bank's Hong Kong branch-and then disappeared. In earlier days, Houghton ran the Texas Tavern in Sydney, a popular nightspot for American troops on leave from Vietnam. There he did business

with Abe Saffron, a frequent object of organized-crime inquiries in Australia. • Harry Wainwright, an expatriate American and reputed mob lawyer, fled San Francisco in 1973 to avoid arrest for tax evasion. His business associates included members of at least two of Australia's biggest drug rings. He also had close ties to Nugan Hand. He deposited money there as early as 1975, and by the next year counted Michael Hand as a personal friend. • Brian Alexander, a Sydney law clerk, was present at Frank Nugan's home when police arrived to tell the banker's family of his death. Alexander recently stood trial for complicity in the murder of two drug couriers in Australia's biggest heroin ring. Alexander was acquitted, although the head of the ring admitted that he paid Alexander $110,000 over several years to "get information from the narcs" that would expose police informants. • Paul Hayward, a rugby star, was one of Nugan Hand's most favored clients. In October 1978 Thai police arrested Hayward and two accomplices in possession of a suitcase full of absolutely pure heroin. His network, keyed into Chinese drug syndicates in Thailand, supplied at least 15 percent of all heroin consumed in New South Wales. One Australian government investigator says there is little doubt that Nugan Hand financed the whole drug operation. Unfortunately, Nugan and Hand destroyed the records needed to test that allegation. • Murray Riley, a former detective sergeant in New South Wales, masterminded a smuggling effort that led in 1978 to the largest drug haul in Australian history-l.5 tons of potent Thai "buddha sticks." Australian investigators believe money deposited with Nugan Hand financed that ill-fated shipment. A bronze medalist in sculling in the 1956 Olympics and once a powerful and respected figure, Riley has for some years been a leader in Australian organized crime. He crossed the Pacific as often as twice a month to do business with U.S. racketeers, including mob executioner Jimmy Fratianno, and Salvatore Amarena, a member of the powerful crime "families" of Santos Trafficante in Tampa and Carlos Marcello in New Orleans. In Riley's address book police found Michael Hand's Hong Kong telephone number. One of Riley's henchmen admits to having moved large sums of money through Nugan Hand's Hong Kong branch and doing business with Michael Hand. Riley and another part-

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ner reportedly visited the bank several times under assumed names.

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ONSIDERING ALL THESE circumstances, Justice A. E. Woodward, head of a recent Royal Commission inquiry into the drug traffic, concluded that he had "sufficient evidence" of the bank's involvement with criminals "to justify a full inquiry into its affairs and the parts played therein by Nugan and Hand." Nonetheless, there has been no "full inquiry" -on either side of the Pacific. Americans may wonder why the U.S. government and most of the press have remained so quiet about a scandal that once again links American and foreign criminals to the CIA. Certainly there is a prima facie case to be answered. The affairs of Nugan Hand continuously intersected with the world of drugs, money laundering, and arms traffic-a milieu that invariably attracts intelligence interest and frequently covers for intelligence operations. No one has yet proven an operational CIA connection to the bank. But Nugan Hand certainly showed a greater predilection for hiring CIA flight managers and CIA energy experts than it did for hiring bankers to run a viable bank. This bank, so top-heavy with former military and intelligence operations personnel, and so bereft of

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financial talent, was no ordinary bank. Did Nugan Hand in some sense represent an ongoing drug-intelligence connection in Southeast Asia that survived the disappearance there of CIA assets like Air America? The answer probably lies in Thailand, long the nerve center of the dope traffic and still a bastion of U.S.

ilmericans may wonder why the (l.S. government and press have been so quiet about the scandal. military influence. Most postwar Thai dictatorships have participated, with varying degress of U.S. toleration or even support, in the drug traffic flowing out of the Golden Triangle. Nugan Hand's drug connections all lead back to Thailand: the massive "buddha stick" purchases of Murray Riley, the suitcase full of pure white heroin belonging to Paul Hayward, and the Bangkok base of the "Mr. Asia" syndicate that Brian Alexander allegedly served. And the "Green Berets" who staffed the bank were all products of the VietnamThailand theater, whether they were real Green Berets, like Michael Hand, or generals with a lifetime of experience in Thailand, like Edwin Black. Thailand is also the link between Nugan Hand and another CIA front, the Bahamas-based Castle Bank. Until its demise in 1977, the Castle Bank specialized in laundering money for the CIA while shielding from federal prosecution the mobsters and drug traffickers who also banked there.' Its founder and American counsel, Paul Helliwell, served as Miami consul for the king of Thailand back in the 1950s. At the same time he organized Sea Supply, a CIA proprietary company. It furnished supplies to anticommunist Chinese guerrilla forces in the hills of Thailand, Laos, and Burma, where they cultivated fields of opium poppies and convoyed huge caravans of the drug into Thailand. The corrupt Thai border police saw that the shipments found their way to world markets. The CIA, having arranged for Sea Supply to train and advise the border police, \¥as thus drawn intimately into this drug connection. As late as

1973, one CIA agent, Puttaporn Khramkhruan, was arrested and indicted in Chicago for taking part in an illegal opium shipment to the United States. The CIA finally got the Justice Department to drop the charges, but failed to suppress the fact that Khramkhruan had been set up in business by another CIA front company, Joseph Z. Taylor Associates, that was currently training the Thai border police. Nugan Hand need not have been organized by the CIA, as was the Castle Bank, to have such connections. Some of the more prominent military and CIA figures associated with Nugan Hand came on board only after it was founded, which suggests that the original partners sought to buy a measure of immunitycall it respectability-for their basically criminal enterprise. Perhaps the closest institutional analogy to Nugan Hand is not the Castle Bank but another CIAlinked drug operation, World Finance Corporation (WFC). Founded by Bay of Pigs veteran Guillermo HernandezCartaya, WFC enjoyed a dizzying rate of growth until its recent collapse. Upwards of sixty employees of wrc and its affiliate Aerocondor Airlines had past links to the CIA, according to Sergeant James Ryder, chief of the Dade County organized crime unit at Miami International airport. WFC was the financial cover for a ring that brought hundreds of millions of dollars worth of cocaine and other drugs into the United States each year-with total immunity from federal prosecution. When Ryder's men began looking into WFC, he says, "we were asked to layoff of them because it did involve national security. An individual came down from Washington and told us the corporation was a completely legitimate company and that we were wasting our time." Nugan Hand, with its tangled web of ties to drug and intelligence operations in Southeast Asia, was a small but significant manifestation of the legacy of the Vietnam War. Just as the Florida drug traffic, now dominated by CIAtrained Cubans, flowered in the aftermath of the Bay of Pigs fiasco, so the "Golden Triangle" became the world's greatest producer of opium and refined heroin under the guidance of CIA mercenaries supplied by Civil Air Transport, Air America, and Sea Supply. As those proprietaries faded from the scene, and U.S. intelligence veterans "retired" to private life, the drug infrastructure remained intact. The Nugan Hands of the world represent the return on that unholy investment. CJi .NOVEMBER

24,1980